What do you think about hedging?

[Luke Hansen]

Foreign currency exchange traders are now using hedging as hedging can help a forex trader to keep his wealth position intact in this uncertain market place. But I personally think that hedging is an aggressive trading strategy as a forex trader tries to take simultaneous positions of buying and selling on a currency pair so that no matter in which direction the price moves the trader will conclude with no risks.

 

[anna.serea]

There is always high risk in forex world. The hedging method make your risk double.

 

[Nosero]

I think hedging is a protective tool on the Forex market if you have a strong knowledge about the market. Hedging allows you to nullify your losses with your analysis if you committed a mistake and after some time you realized that I am going in the wrong direction. Yes, a good tool!

 

[Jurlare]

Hedging against investment risk means strategically using instruments in the market to offset the risk of any adverse price movements. In other words, investors hedge one investment by making another. Technically, to hedge you would invest in two securities with negative correlations.

 

[Geofery]

There is always high risk in forex world. The hedging method make your risk double.

No, hedging does not increase risk. You should understand what hedging means. Here is a quote:

Forex traders who engage in carry trade strategies may use currency options to hedge their carry trades. These traders may also use other highly correlated currency pairs to hedge their carry trades. For example, let’s say a long position on pair X yields an interest rate of 3% while a short position on pair Y yields -1.2%. If X and Y are highly correlated, a long position in X may be effectively hedged with a short position in Y, while at the same time earning positive carry(interest) between the two trades.

 

[Jurlare]

This is additional thing that should be mastered on Forex market. Hedging can be very good risk management tool to decrease risk on investment and safeguard profitability. But, it needs to be thoroughly structured and applied, which requires previous knowledge and understanding of hedging

 

[anton.blood]

Some brokers allow you to place trades that are direct hedges.

 

[anna.semera]

In forex trading, a level of risk that might occur is always changing. There is no definite way to predict the movement of a currency pair at the time to come. One of the ways that we can do is limit the risk in order to protect our trading position or commonly known with the hedging

 

[KariPlov]

Anna, you are absolutely right. Hedging is probably good way to keep some of the risks of failure under control. I don’t use hedging in my trading. Why? Because for me it is so complicated that I just gave up

 

[Electric Rainbow]

It is risky and there many countries who have banned this strategy due to high risk. Also many brokers do not allow it because of the risk with money.